Most hedge fund interviews for research analysts start with a behavioral interview with a “gatekeeper.” This is usually a junior analyst or mid-level analyst. This round is to see whether the candidate is a good fit and, overall, an impressive candidate. There usually are not many technical questions at this point.
During the second round, candidates will typically meet more analysts at the fund, and they will likely test technical proficiency. Candidates will be asked questions relating to Accounting, Financial Statement Analysis, and Valuation. In this situation, a candidate will generally be put under pressure by the analysts and will be compared with other candidates based on his or her responses.
The third round is often a case study, which can be taken in-house or in a take-home format. The hedge fund will give the candidate a company name, ask him or her to build a financial model, and form an investment opinion based on the model and public information available. The candidate will typically have approximately one week to turn this case in. If it is an in-house case study, the candidate will usually be given about 1-3 hours, with the amount of work dependent on how much time is given (for example, a candidate cannot build a complete financial model and read all the important notes in the 10-K’s and 10-Q’s in only 1 hour).
Hedge Fund Interview: Pitching a Long/Short
Many candidates do not realize this, but pitching a proprietary long or short investment idea is by far the most important part of the interviewing process. Portfolio managers almost unanimously say, “I’m here to make money, bottom line.”
Note: do NOT try to pitch 5-10 ideas—learn 1 or 2 ideas very well and make sure to know everything there is to know about the investment situation and why it is an attractive investment (the company, competitors, the dynamics, pricing, expected return, etc.).
Practically every interviewing hedge fund professional will want to talk to candidates about stocks. Candidates will be required to pitch at least one long idea and one short idea in almost every interview they attend. This tests the candidate’s ability to understand a company while demonstrating his or her interest in investing. Knowing what to expect and how to truly understand an investment idea is of great advantage in this process.
A good rule of thumb is this: have 2 good long investment ideas and 1 good short investment idea. All three ideas should be as current as possible.
Understanding the company and the industry in which it operates is the most important step. Make sure to do your initial homework. The initial steps in learning about a company:
- Read the “Business Overview” section of the Company’s 10-K.
- Read at least 2 sell-side initiation reports.
- Read or listen to the company’s last 2-4 earnings conference calls.
- Read the company’s latest investor presentation.
- Read the last 2 years worth of press releases via the company’s website.
- Read the last 6 months worth of sell-side equity research.
- Learn about the industry and company competition.
- Understand the general investor sentiment around the company (i.e., are sophisticated investors bullish or bearish on the stock?).
Once you have a good grasp of the company, try asking yourself these 4 questions:
- What is the consensus opinion of the company?
- What is your perception or view and how does it deviate from the consensus? Why?
- How does the hedge fund get paid (what has to happen for your view to play out)?
- How much do you expect to make if you are right?
In reality, this is exactly what you would be doing at a hedge fund – making investments based upon very diligent analysis of a company and its situation, coming up with unique views, and (hopefully) making a positive return relative to that consensus because of a superior view. It is critical to understand the companies you are pitching inside-and-out if you expect to be successful at this in the long run.
Hedge fund interviews, in general, are arguably some of the most competitive in finance. You will not only be up against Ivy League candidates but also against top college graduates working out of Bulge Bracket investment banks and occasionally other hedge fund analysts looking for a change. Street of Walls finds that bringing ideas with you into the interview can be a good way to differentiate yourself and also to show the fund that you are serious about landing this job. In the chapters to come you will see real-life examples of quick one-page case studies to give you ideas for how to build your own.
Hedge Fund Interview: Tips on How to Dress
Men: Style & Colors
- Suit: Wear a solid colored suit, either dark grey or dark blue, with a two-button coat. Classy but conservative is the name of the game.
- Shirts: Wear solid shirts as well, white or light blue. No French cuffs.
- Tie: Wear something conservative.
- Shoes: Black cap-toes are the classic banker look.
Men: Suggestions on Brands
- Suit: Zegna (expensive but good), Hickey Freeman, Hugo Boss, Brooks Brothers
- Shirts: Brooks Brothers, Charles Tyrwhitt, Bloomingdales, Macy’s
- Tie: Brooks Brothers, Charles Tyrwhitt, Vineyard Vines, Zegna, Hickey Freeman, Ferragamo
- Belts: Brooks Brothers or similar
- Shoes: Allen Edmonds, Cole Haan, Salvatore Ferragamo
Women: Style & Colors
- Wear a conservative suit, generally either navy, dark grey or black
- If wearing a skirt suit, do not wear a tight nor revealing one
- Button-down shirt of a solid, light color
- Be conservative with respect to makeup and perfume
Women – Suggestions on Brands/Shopping
- J. Crew
- Banana Republic
- Zara
- Bloomingdale’s
- Macy’s
Very important: No French cuffs. No pocket squares. No cut-back collars. These looks are not conservative, and may clash with the interviewer’s sensibilities.
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FAQs
Working at a hedge fund and working on Wall Street are not mutually exclusive; in fact, many hedge funds are located on or near Wall Street. "Wall Street" is a metonym that often refers to the financial district in New York City and the broader financial industry.
How do I prepare for a hedge fund interview? ›
“Preparation” for hedge fund interviews means coming up with 2-3 solid investment pitches, working on spinning your pitches into sounding like deals and then taking a strong view of each one, and making sure you can explain your market views coherently.
What is the average salary of a hedge fund manager on Wall Street? ›
Hedge fund manager salaries typically range between $70,000 and $261,000 yearly. The average hourly rate for hedge fund managers is $65.1 per hour. Hedge fund manager salary is impacted by location, education, and experience. Hedge fund managers earn the highest average salary in New York.
How should I dress for a hedge fund interview? ›
“If they are in jeans, dress business casual,” he said. “If they are business casual, wear something like a jacket with no tie.” He said that none of his current hedge fund clients have a suit-only dress code. While jeans may be a bit over-the-top at some firms, so is overly formal dress.
What are the top 3 hedge funds? ›
What are the Largest 100 Hedge Funds Ranked by AUM?
| Rank | Firm Name | State |
|---|
| 1 | Millennium Management | NY |
| 2 | Citadel Advisors | FL |
| 3 | Bridgewater Associates | CT |
| 4 | Balyasny Asset Management | IL |
60 more rowsFeb 20, 2024
The largest hedge funds in the world include Citadel, Bridgewater, AQR, and D.E. Shaw.
- Citadel. Citadel is based in Miami and focuses on five strategies. ...
- Bridgewater Associates. ...
- AQR Capital Management. ...
- D.E. Shaw. ...
- Renaissance Technologies. ...
- Two Sigma Investments. ...
- Elliott Investment Management. ...
- Farallon Capital Management.
Hedge Fund Jobs, Salaries & Compensation
| Position Title | Typical Age Range | Base Salary + Bonus (USD) |
|---|
| Junior Analyst or Research Associate | 22-25 | $100K - $150K |
| Analyst | 24-30 | $200K - $600K |
| Senior Analyst or Sector Head | 28-33 | $500K - $1 million |
| Portfolio Manager | 32+ | $500K - $3 million |
Hedge funds employ some of the best-paid business professionals anywhere, but landing your first job in the industry is no cakewalk. Building a hedge fund career takes determination, networking stamina, and a fierce competitive streak. Here are some steps to help get you to that interview and then land that job.
How stressful is it to work at a hedge fund? ›
Reality: High Stress and Potentially Constant Long Work Hours. Depending on the type of fund, you could work long hours especially when you are just starting. There is a reason why people say at hedge funds your first 6 months is like “drinking from a fire hose.” The role is unlike investment banking or private equity.
Who are the richest hedge fund managers? ›
Who Is the Richest Hedge Fund Manager? Ken Griffin of Citadel is both the richest hedge fund manager and the highest paid. In 2022, he earned $41. billion, and by the beginning of 2023 his net worth was estimated at $35 billion.
Hedge fund managers typically earn above-average compensation, often from a two-and-twenty fee structure. Hedge fund managers typically specialize in a particular investment strategy that they then use to power their fund portfolio's mandate for profits.
Do hedge fund managers make millions? ›
Successful hedge fund managers routinely pocket millions of dollars in total compensation, with the top fund managers earning paychecks in the billions of US dollars[1]. This doesn't include how much they personally stand to benefit from their own investments in the funds they manage.
What kind of people do hedge funds hire? ›
Hedge Fund Career Requirements
You should ideally be an investment banking analyst at a top bank, an equity research associate at a top bank, a research or investment analyst at an asset management firm or mutual fund, or a sales & trading professional on a highly relevant desk.
What GPA do you need to get into a hedge fund? ›
There is no specific or average GPA requirement for becoming a hedge fund analyst. However, hedge funds tend to hire top-performing graduates from prestigious universities and top-ranked business schools. These candidates typically have strong academic records, including high GPAs and test scores.
Do hedge funds hire straight out of college? ›
Hedge funds typically hire candidates with significant industry experience, advanced degrees, or specialized skills. However, some hedge funds may also offer entry-level positions for recent college graduates.
Are hedge funds on the stock market? ›
Still, while direct interaction with hedge funds is still mostly limited to accredited investors, some private equity partnerships that engage in hedge fund-like activity do list themselves on public stock exchanges and can thus be traded by otherwise-excluded participants.
Where are most hedge funds located? ›
Pension funds are, by some distance, the largest aggregate allocator to hedge funds, contributing almost half of all institutional capital invested in the asset class by US- based institutional investors (Fig. 2). Over half of US-based funds of hedge funds are based in New York (Fig.
Is Goldman Sachs a hedge fund? ›
It is a market maker for many types of financial products and provides clearing and custodian bank services. It operates private-equity funds and hedge funds.
Do hedge funds beat the S&P 500? ›
Data from an article by The American Enterprise Institute charted the average hedge fund's performance from 2011 to 2020. Over that stretch, the typical hedge fund underperformed the S&P 500 every single year. Again, there will be an occasional manager who outperforms, but rarely does it last long.
